Boehner defies Obama veto threat with new payroll tax plan

House Speaker John Boehner a news conference Wednesday at the Republican… (Chip Somodevilla / Getty…)

House Speaker John A. Boehner (R-Ohio) unveiled a new plan for extending a payroll tax holiday, appearing to overcome deep resistance from rank-and-file Republicans but alienating possible Democratic votes by broadening the package to include other GOP political priorities.

Time is dwindling for Congress to strike a deal on President Obama's payroll tax cut or risk raising taxes by $1,000 on average for 160 million working Americans on Jan. 1.

The new proposal may help Boehner attract the GOP votes needed, but it defies Obama's threat to veto the package by including a provision to advance the controversial Keystone XL pipeline. It also includes other restrictions on illegal immigrants and the new healthcare law that Democrats are likely to find objectionable.

"The American people can't wait, as the president said," Boehner said after a closed meeting Thursday with GOP lawmakers. "At a time when the American people are still asking the question, where are the jobs, I think this is a bipartisan proposal that the president ought to endorse."

One by one, reluctant Republicans stood up at the meeting to announce they were shifting their opposition to the payroll tax break and would now support the proposal. Lawmakers said they were putting aside their reservations over the tax cut in part because of the other measures added to the bill.

Rep. Phil Gingrey of Georgia, who was among those who spoke at the meeting, said he shifted his vote to a definite yes, even though he's "not crazy" about the payroll tax holiday. But he announced his support because the package includes healthcare measures that he, as a doctor, had told GOP leadership was a priority.

The package Boehner has been compiling for more than a week was not made publicly available, but it includes the payroll tax holiday as well as an extension of long-term unemployment benefits, which also run out Dec. 31, and a routine pay rate adjustment for doctors who treat Medicare patients.

Part of the problem for Republicans has been how to offset the costs of the tax cut and other measures. Republicans reject Democrats' proposal to impose a surtax on those earning above $1 million annually.

But Boehner has struggled to convince Republicans that to allow the tax break to lapse would expose the GOP to criticism that it was raising taxes on ordinary Americans -- a politically dangerous narrative that goes against party orthodoxy. His members have worried that because the payroll tax cut reduces the tax workers pay into Social Security the retirement system could be jeopardized. Boehner has had to convince them that budget cuts elsewhere would shore up the funding stream.

To pay for the tax break, Boehner's plan borrows heavily from a proposal offered by Republicans in the Senate that would freeze federal workers' salaries for three more years -- they already have their pay frozen for this year and next. It would also cut the government workforce by only hiring new employees once others quit and charging wealthier seniors more for Medicare.

Those provisions had not been enough to attract support from Republicans in the Senate, who shot that proposal down last week in a surprise revolt.

To sweeten the deal, Boehner tacked on a provision that would reduce long-term unemployment benefits, expanding on Obama's interest in revamping unemployment programs by requiring those who are out of work to participate in temporary jobs or schooling while collecting checks. The proposal would phase out the guarantee of 99 weeks of long-term benefits to about 50 weeks.

But other measures are more politically tinged. Hewing to conservatives in his party, Boehner also included a provision that would prevent illegal immigrants from receiving tax credits, lawmakers said.

The Keystone provision has drawn direct opposition from the president. After a meeting with the prime minister of Canada this week, Obama said he would veto any package that includes the GOP plan to advance the controversial pipeline between Canada and the Gulf of Mexico. Republicans call the pipeline a "shovel-ready" jobs project, but critics worry it will pose environmental problems. Obama has shelved a decision on the project until after the 2012 election.

Another measure, whichwould roll back Environmental Protection Agency regulations on emissions from boilers, is also in the package.

The House expects to hold a vote early next week -- days before the House's targeted Friday adjournment. Later this week the Senate is expected to vote again on Democratic and Republican proposals, but both are expected to fail.